Carrying A Heavy Load?

Get Schooled In Ways To Pay Off Student Debt

April 08, 1996|By Marilyn Kennedy Melia. Special to the Tribune.

Today's college grads carry heavy debt, but there are ways to lighten the load.

The typical student today faces a heavy load. Along with the sheepskin comes an average debt of about $12,000 in student loans, according to estimates from the Student Loan Marketing Association, also known as Sallie Mae.

"The federal government is putting more emphasis on loan programs rather than grant programs," explains Howard Florine, director of financial aid at Rosary College in River Forest.

Students are borrowing more to meet spiraling tuition tabs, but their earnings once they enter the job market aren't rising much from year to year. Many new graduates will face a cash crunch each month as they attempt to meet their current expenses and pay off education loans.

The loan load, contends 27-year-old Ken Kurson, editor of Green, a financial newsletter for young adults, is putting a cramp in the lifestyles of Generation Xers. "We aren't buying homes," he notes, because student loans already amount to a kind of mini-mortgage.

The federal government, which guarantees the bulk of student loans, has a vested interest in seeing that graduates can actually pay back their debt. An array of consolidation programs, which offer extended terms on the loans, graduated repayment options and payback geared to income increases, are available to help graduates pay off their loans.

What's more, in some cases graduates who are struggling to find a job--and can prove they're actively pounding the pavement--are eligible for a deferment. And the government will even pay the interest costs during the postponement period, provided the debt is a subsidized Stafford loan, the most common type of federal student loan. Deferments also can be granted when borrowers fall upon economic hard times, and loan debts are forgiven if a graduate become permanently disabled.

Today's grads are charting their future with an eye to paying off their student past. Take Northwestern senior Joe Thiegs, for instance. Even with a National Merit Scholarship, other scholarships financing most of his freshman year and some work-study programs and university grants, Thiegs says he's graduating this June some $30,000 in the hole. A political science and sociology major, Thiegs has been lucky enough to secure a decent job offer, but he has been toying with the idea of going to law school.

"But my concern with law school is that it would mean even more debt," concedes Thiegs.

Still, since he's intrigued with the idea of helping people, he's looking into working in the public interest sector after law school. If he can find a loan program where his law school debt will be forgiven for his stint in the public sector, it could influence him to go ahead and pursue a law degree.

Graduates who aim to maintain an A-plus credit record need to learn their options when it comes to paying back their loans. Too many young adults are somewhat cavalier about their loans, thinking missed or late payments aren't serious offenses.

But in fact, missed payments mar your record just as neglecting a Visa bill can. What's more, the federal government can marshal its considerable muscle to collect from anyone it considers a deadbeat.

"When the federal government backs the loan, there are a lot of weapons available," notes Tom Breyer, assistant to the chief of programs for the Illinois Student Assistance Commission. "They can seize any tax refund due you, and sometimes borrowers are taken to court."

Ideally, you should call your lender the minute you foresee a problem meeting your payments, notes Christina Pappas, consolidation representative for River Forest Student Loans, a division of River Forest Bancorp. Depending on the circumstance, the lender may be able to arrange a deferment or other options.

Any student owing at least $7,500--and even parents who have taken out PLUS (Parent Loans for Undergraduate Students) to help pay their child's tuition--can arrange for lower payments through a consolidation program.

About 30 percent of college students and their parents obtain their federally guaranteed loans directly through their school, and they must seek any new loan terms through the Direct Consolidation Loan Program (800-848-0982).

Students who've been directed by their school's financial aid office to seek a loan from a local lender should contact that lender first about any possible consolidation plans. If the lender doesn't have such options, borrowers can contact another lender active in student lending to arrange a consolidation plan, or a secondary market agency or arrange it through the Direct Consolidation Loan Program.

The loan consolidation plans offered through the direct program and those offered through lenders or through secondary loan agencies are very similar, notes Breyer.

Basically, there's an extended repayment plan that allows borrowers to stretch out the standard payback term of 10 years for up to 30 years.